(Reuters) - Global sustainable mutual fund assets hit a record high at the end of third quarter, bolstered by new disclosure rules in Europe, although the pace of net inflows slowed from the prior quarter, data from Morningstar showed. Funds focussed on environmental, social and governance (ESG) related issues saw their combined assets climb to $3.9 trillion at the end of September, the data showed. Graphic - Sustainable funds" asset size: The growth was mainly due to a significant increase in the number of funds meeting Morningstar’s “sustainable investment” criteria in Europe following the introduction of the Sustainable Finance Disclosure Regulation (SFDR) on March 10, it said in a report. The number of sustainable funds captured in Morningstar’s global sustainable universe has grown by more than 51% over the third quarter, reaching 7,486 funds at the end of September, the report said. According to SFDR, firms including fund houses, insurers and pension funds that provide financial products or services in the European Union will have to begin disclosing how sustainable they really are. The SFDR aims to help drive 1 trillion euros ($1.2 trillion) into green investments over the next decade, iron out the patchy climate-related information currently provided by financial market participants, and give firms with genuinely sustainable products an edge. However, flows into sustainable funds dropped to $144 billion in the third quarter, down 14% from the previous quarter. Graphic - Quarterly flows into sustainable funds: European sustainable funds continued to secure the lion’s share of net inflows at $108.7 billion, while the United States and Asia ex-Japan attracted $15.7 billion and $0.9 billion, respectively. Graphic - Global sustainable funds" asset size by region: “One of the primary reasons for the drop in flows to sustainable assets is the larger global trend of decreased inflows in the third quarter,” said Craig Jonas, chief executive officer at impact investing company CoPeace. “We expect to see a continued increase in assets and flows into sustainable funds throughout the remainder of the year. This is reflected in the growing portion of assets-under-management incorporating ESG criteria.” Sustainable fixed-income funds attracted $30.8 billion in the third quarter, 22% higher than the previous quarter, due to concerns over inflation and uncertainty over interest rate hikes. On the other hand, sustainable equity funds pulled in $55 billion, 23% less than in the second quarter. Reporting by Patturaja Murugaboopathy and Anurag Maan in Bengaluru; Editing by Mark Potter